"There is a gap of approximately $6 million per year in our budget in relation to renewing our assets," she said.

"If Shellharbour City Council can't demonstrate that we're financially stable and that we can sustain ourselves, we'll be one of the first cabs off the rank [for amalgamation]. How would we feel about being amalgamated with Wollongong?"

She acknowledged that no-one wanted to pay extra rates, but said "everybody can identify some things in their area that they would like fixed or repaired or improved".

Labor councillor John Murray and independent Helen Stewart also backed the recommendation.

Cr Moran argued it was "not the right time" to ask for rate rises while also going ahead with the $55 million City Hub.

The council now has until March to speak to residents and apply for a special rates variation.

Figures last month showed rate increases of up to 42 per cent were required by 2016-17 to bring the city's asset renewal in line with the state average.